Home Insurance: Should You Go Through Your Bank? - 16 Sep 2009 06:43
Until recently, Banks in South Africa have insisted that homeowners take out home insurance through an insurer they specified. After all, they’re giving the homeowner the finances for their home, it’s only fair they get the cover for their investment that they want. The problem with this scenario, is that the homeowner may not be getting what he or she wants out of their insurance policy.
With tactics like ‘speeding up the transfer process’ or denying your home loan, banks coerce clients into insuring their buildings through them. Why? Banks usually own the insurer who underwrites their home insurance policies, which means they earn more off you with your added insurance policy.
Moreover, banks earn interest on your insurance premiums. They take the annaul home insurance that you pay and hand it over to their insurer (the company they own to underwrite your policy) and nestle that away in a savings account earning interest. Since you paid an extra amount to you bond (the annual amount of your insurance) you pay interest on that amount at current exchange rates.
Fortunately, however, the National Credit Act of 2007 have forced banks to play nice and give home owner’s a range of options available when it comes to insurance. This does not mean however that they will not try to convince you to insure with them. They will. But you now know you have options available. Choosing one of those options does mean that you will have the added burden of proving to your bank that you have adequate cover for their investment.
You now have the freedom to shop around and ensure that your interests are being protected as well. Other insurers may offer better deals, especially for insuring more than one item with them. The cheaper premiums and better service are worth the uncomfortable glares from bank managers and loan clerks.
Until recently, Banks in South Africa have insisted that homeowners take out home insurance through an insurer they specified. After all, they’re giving the homeowner the finances for their home, it’s only fair they get the cover for their investment that they want. The problem with this scenario, is that the homeowner may not be getting what he or she wants out of their insurance policy.
With tactics like ‘speeding up the transfer process’ or denying your home loan, banks coerce clients into insuring their buildings through them. Why? Banks usually own the insurer who underwrites their home insurance policies, which means they earn more off you with your added insurance policy.
Moreover, banks earn interest on your insurance premiums. They take the annaul home insurance that you pay and hand it over to their insurer (the company they own to underwrite your policy) and nestle that away in a savings account earning interest. Since you paid an extra amount to you bond (the annual amount of your insurance) you pay interest on that amount at current exchange rates.
Fortunately, however, the National Credit Act of 2007 have forced banks to play nice and give home owner’s a range of options available when it comes to insurance. This does not mean however that they will not try to convince you to insure with them. They will. But you now know you have options available. Choosing one of those options does mean that you will have the added burden of proving to your bank that you have adequate cover for their investment.
You now have the freedom to shop around and ensure that your interests are being protected as well. Other insurers may offer better deals, especially for insuring more than one item with them. The cheaper premiums and better service are worth the uncomfortable glares from bank managers and loan clerks.